Numis Securities cut its profits forecasts from £19m to £12m for the year, with the biggest swing at Pearl & Dean, where it widened expected full-year losses from £800,000 to £4m. The shares fell 16 to 53p in early trading.

The sharp profits fall and rising net debt, which is expected to reach £155m by the year end, has put the company in danger of breaching its banking covenants. SMG has begun talks with its banks and said a "satisfactory outcome is expected".

The declining performance of Pearl & Dean comes just as SMG is trying to sell the business alongside its Primesight outdoor advertising business.

It said it had received a number of expressions of interest for both of them, with "the sale of Primesight proceeding more quickly as a result of its stronger trading". Analysts reckon it will be lucky to get anything but a nominal sum for Pearl & Dean, though Primesight could fetch £60m.

SMG said Primesight continued to trade ahead of market expectations while Virgin Radio is outperforming its market.

SMG has been searching for a chief executive since Andrew Flanagan was ousted earlier this year. It said a number of names had been selected from a "long list" and that it was in talks with potential candidates.

Patrick Yau, an analyst at Bridgewell Securities, said: "Private equity interest could be aroused, but the ongoing disposal of the group's non-core businesses will reduce the attractiveness for these groups."